Spain Doesn’t Want a Bailout–Just Send Money. Now!

Nader Nazemi - Spain

Too Big to Fail ?

(MADRID) — Even good news isn’t enough nowadays in Spain. The government in Madrid on Thursday successfully auctioned 2 billion euros worth of debt — and it didn’t really matter. In a country where each new days seems to bring one more grim revelation about the extent of the financial crisis, the news that bidding was strong, and that the government managed to sell slightly more than it had expected, was certainly welcome. But the sale did little to change the growing consensus that Spain required some form of rescue from Europe. And that it needs it imminently.

“There is a positive aspect to the sale–demand was high–and a negative aspect, which is that the yield was too,” says José Luís Peydro, professor of economics at Barcelona’s Pompeu Fabra univeristy, referring to the 6.04% interest rate on 10-year bonds. “But neither changes the fact that Spain is going to need some kind of intervention.” Indeed, that assessment was reinforced later on Thursday by a dramatic three-step downgrading of Spain’s sovereign debt, from A to BBB, by the Fitch rating agency.

The pressing question now is what form the intervention will take. Germany has begun to openly pressure Spain into requesting a national bailout of the sort taken by Greece, Portugal, and Ireland. Yet prime minister Mariano Rajoy continues to insist that Spain does not require, and will not accept, a full-bore rescue. Although he admitted on Tuesday that Spain’s banks needed European help, he has instead requested that the aid come in the form of a direct injection of capital into Spain’s ailing banks. (Last week, the country’s fourth largest bank–already partially nationalized–requested an additional 19 billion euros in public money.)


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